The Party's Over: Stocks Snap Winning Streak
CNBC.com News Editor
OK, pack up your party hats and glittery 2009 glasses.
Stocks snapped a three-day winning streak Monday as traders cashed in some of their chips following some dismal reports on the telecom and financial sectors.
The Dow Jones Industrial Average ended down more than 80 points, or 0.9 percent, falling below the 9,000 mark, after rallying about 6 percent last week.
Stocks got a brief reprieve from better-than-expected reports on construction spending and auto sales, before resuming their slide.
The S&P 500 shed about 0.6 percent, while the Nasdaq lost 0.6 percent.
Construction spending fell by half of what was expected— 0.6 percent, compared with 1.2 percent — in November, which helped the market shave some of its losses. The prior month was also revised sharply higher, to show a drop of 0.4 percent compared with the initial estimate of a 1.2-percent decline.
General Motors was one of the biggest gainers on the Dow, climbing 1.6 percent, after the auto maker reported its sales fell 31.4 percent, less than expected, in December.
Ford shares also rose sharply, jumping 4.9 percent, after the company said its sales fell 32.4 percent.
Economists had expected to see much worse — a 40-percent decline from auto makers.
JPMorgan Chase was the biggest drag on the Dow, falling 6.7 percent, after Deutsche Bank slashed its forecast on the bank and 15 other large commercial banks.
Verizon and AT&T rounded out the Dow's bottom three, falling 6.2 percent and 3.4 percent, respectively, after Bernstein Research downgraded the stocks, saying the wireless-communication market is near saturation and the sector, already facing slowing subscription rates, could be in for a sharp slowdown.
Shares of General Electric fell 2.6 percent after a Sterne Agee analyst said GE's triple-A credit rating or its dividend "looks likely to be reduced" this year. Though, he clarified that it probably wouldn't be until the company, which is the parent of CNBC, reports first- or even second-quarter earnings.
Investors will be watching closely as President-elect Barack Obama's stimulus plan takes shape.
Obama is meeting with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid today to discuss the plan. Obama is seeking as much as $310 billion in tax cuts, which would account for roughly 40 percent of the plan, to win support from Republicans.
Meanwhile, Obama's quest for a smooth transition hit its first snag Sunday as New Mexico Gov. Bill Richardson withdrew his nomination for commerce secretary amid a legal inquiry in his home state over a company that made a campaign contribution and later won a big state contract.
As the market was searching for direction in the new year, market pros were optimistic.
"[T]he equity markets can trade up — maybe about 20 percent" this year, Phil Dow, of RBC Wealth Management, told CNBC. "The key to this is going to be massive government fiscal and monetary stimulus, which eventually reinstitutes the profit motive in America," he said, adding that RBC pegs the turn around mid-year.
Asian stocks hit a two-month high as appetite for risk seems to have returned, while European shares were also higher on hopes of tax cuts from a stimulus package in Germany.
Apple shares advanced 4.2 percent as MacWorld kicked off and CEO Steve Jobs revealed in a letter to the Apple Community that his weight loss is due to a hormone imbalance.
Elsewhere in tech land, Microsoft will embark on a significant cost-cutting initiative in 2009, which might begin as early as this month, to counter effects of a slowdown in sales. However, reports on various blogs of 15,000 job cuts are "grossly exaggerated," Microsoft sources told CNBC. Microsoft shares rose 0.9 percent.
Shares of Amazon skidded 0.6 percent even as JPMorgan upgraded its rating on the online marketplace to "overweight" from "neutral." Amazon has said that the 2008 holiday season was its best ever, and JPMorgan also gave the company high marks for its efforts to grow sales outside its core business.
Meanwhile, Google has come under fire in China, where government officials are blasting the search engine behemoth for not doing enough to crack down on pornography, which is banned in the country. Shares rose 2.1 percent.
Energy stocks were mixed, with Chevron up and ExxonMobil down, as oil prices slipped following a rally last week.
Pfizeris mulling buying a large drug company to improve its financial health, bucking the trend among its peers, which have turned against the "mega-mergers" of the past, according to a report by the Financial Times. Its shares fell 0.6 percent.
Tyson Foods shares tumbled 6 percent as CEO Dick Bond said he was stepping down from the No. 1 U.S. meat company, effective immediately. Leland Tollett, who was chairman and CEO from 1995 to 1998, will step in as interim president and CEO until a successor is chosen.
MONDAY: Congressional hearings on Madoff case begin; Obama to meet with Pelosi on stimulus plan; MacWorld begins (Jan. 5-9)
TUESDAY: ISM services index; factory orders; pending-home sales
WEDNESDAY: Weekly mortgage applications; ADP employment report; weekly crude inventories; Earnings from Constellation Brands, Family Dollar, Monsanto and Bed, Bath & Beyond
THURSDAY: ECB and BOE rate decisions; Chain-store sales; weekly jobless claims; consumer credit; Consumer Electronics Show begins (Jan. 8-11)
FRIDAY: Jobs report; wholesale trade; Earnings from KB Home
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